Boston Area Hospitality Market Report for Q4 2022

Overview

Despite the ongoing impact of the pandemic on lodging performance, investors continue to bet on the long-term strength of the Boston hotels. Asset sales rebounded in 2021 with 46 hotels selling compared to only 13 in 2020.

RLJ Lodging Trust reentered the downtown Boston market with the purchase of the 205-room AC by Marriott Boston Downtown for $89 Million ($434K/key) in October. This was a very competitive price given Boston's slow rate of recovery. Starwood Capital sold the 510-room dual-branded Aloft and Element at the Seaport to Global Hospitality Investment Group for $142 Million in June, valued at $300,000/key for the Aloft and $238,000/key for the Element, strong prices that illustrate the long-term value of real estate in the Seaport area. Hersha Hospitality Trust sold the 113-room Holiday Inn Express in Cambridge for $32 Million ($283K/key) to private equity firm TPG Real Estate to increase its liquidity. The hotel's location supported the strong pricing as Cambridge is a high barrier to entry market with limited land left to develop and very strong metrics prepandemic. Cambridge's 3-year average occupancy (2017-2019) was 77% and an average rate of $211

Blackstone and Starwood Capital's purchase of Extended Stay America in June 2021 resulted in a change of ownership for eight ESA's in the Boston region. The ESA's that sold had an average price per key of $80,000. Colony Capital divested all of its hotel assets as it hit distress early on in the pandemic. Three hotels in the Boston region, the Residence Inn Foxboro, Residence Inn Franklin, and the Homewood Suites Portsmouth NH were part of this portfolio sale. No prices for these assets were disclosed.

Despite improvement in overall performance metrics recently, hotels are still in distress after nearly two years of impacted performance. According to CoStar's CMBS data, there are 16 hotels in special servicing, up from six two months ago. Nearly half are in the Upper Upscale or Luxury segment and concentrated in the downtown and Cambridge area.